Dollars & Sense: What you need to know about audits

Monday

Feb 11, 2013 at 1:00 PM

Few words in the English language set off alarm bells like the word “audit.” The good news is there are ways to reduce the likelihood the Internal Revenue Service will tag you for an audit. Nevertheless, if a letter from the IRS does appear in your mailbox, don’t panic.

Statistically, the IRS only audits about one percent of taxpayers with incomes under $200,000, according to the tax experts at the Oklahoma Society of Certified Public Accountants. There are red flags that can raise the likelihood you’ll be audited, however.

Here is another helpful tip to protect yourself against an audit:

Be aware of other red flags. Cash businesses draw scrutiny, especially if the return also includes an Earned Income tax Credit or self-employed people claiming meals or travel and entertainment expenses on their Schedule C. Deductions for hobby-related activities on a Schedule C may also raise suspicion.